The latest labor market report from the United Kingdom confirms that the UK economy is in trouble.
Jobless claims rose by 15.5k, the largest increase in 16 years with average earnings growth including and excluding bonuses falling. The layoffs in the financial sector and the problems in the housing market have taking a big toll on the UK economy. We fully expect employment to deteriorate further in the coming months which will prevent the Bank of England from raising interest rates despite strong inflationary pressures. The weaker outlook for the UK economy has not hurt the British pound much, as the currency is holding up well against the US dollar and Euro. Even though the pound fell victim to dollar strength, it is still trading above Tuesday’s low.